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Anzo Lim

USD/JPY: The prospect of interest rate decision of the Bank of Japan

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The Bank of Japan will announce its interest rate decision on January 21. At present, it is generally expected that the Bank of Japan will maintain the policy balance interest rate at - 0.1%.


We expect the BoJ to commit to keep interest rates at their current low level or even cut them until the inflation target of 2% is reached.


With Japan's economy still under pressure from trade tension and consumption tax hikes in October, bank governor Kuroda Tohiko may express his determination to maintain ultra loose monetary policy. At that time, the central bank will also release economic growth and inflation forecasts, which may raise the economic outlook for the new fiscal year.


Bank of Japan governor Kuroda tohiko previously said that if necessary, short-term and long-term interest rates are expected to remain at current or lower levels for a long time. Moody's also expects major global central banks, including the Federal Reserve, the European Central Bank and the Bank of Japan, to maintain loose monetary policy.


With economic data falling, the BoJ will ultimately need to act. We believe that the moderate inflation forecast will strengthen the market's expectation that the Bank of Japan will maintain ultra loose monetary policy. The BoJ will further relax its policy by deepening its guidance on negative interest rate policy, and may cut interest rates by 10 basis points to - 0.2% later in the first quarter of 2020.


USD/JPY daily pivot point: 110.16

S1: 110.04  R1: 110.28

S2: 109.92  R2: 110.40

Edited by Anzo Lim

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